PVR's Ajay Bijli: Nowhere do movie tickets get as heavily taxed as in India

New Delhi, March 9 -- For a man considered to be the poster boy of the multiplex revolution in Indian cinema, Ajay Bijli is decidedly uncomfortable being photographed. He poses slightly self-consciously at his posh Gurugram office with the several chair designs the entertainment company is currently trying out to fit its auditorium and audience requirements. As he celebrates 20 years of running PVR Ltd, India's largest movie theatre chain that operates 569 screens across 123 locations in 48 cities, his motto remains the same: the customer must never feel short-changed by the theatre operator. In an interview, the chairman and managing director of PVR talks about the multiplex chain's evolution and why movie theatres in India should survive the advent of digital platforms. Edited excerpts:
How accepting are you of being tagged the pioneer of the multiplex revolution in India?
I'm very uncomfortable with it. There were a lot of people trying to build a multiplex at that time and I could tell it was going to happen soon. I was just lucky to be the first one off the block. I found the property and was able to get a joint venture in place (between Bijli's then single-screen owned Priya Exhibitors Pvt. Ltd and Australian mass media and entertainment company Village Roadshow Ltd). I was also very fortunate because PVR Anupam (the first multiplex theatre in India) was in south Delhi, a catchment that I understood very well and the Delhi government was very supportive in permitting me to convert a single-screen cinema into a four-plex. All the building by-laws were only written for single-screen cinemas but they allowed me to rewrite the cinematograph rules. So I was just fortunate, I never carry that (tag) because thinking about it means you're looking back and I want to look ahead.
Why did you see multiplexes as an opportunity for India?
I was running a single-screen theatre, Priya, and I could sense the volatility-without blockbusters, which you anyway couldn't have all 52 weeks, the cinema used to run empty. Multiplexes were prevalent internationally and there were 4-5 films getting released every week. I was very keen that we should be able to give people the choice of all the movies that get released one week with good sound, projection and hospitality under one roof. But there were a couple of things bothering me; one, that ticket prices would be incrementally higher than what balcony tickets were at that time-we opened at Rs65-70 compared to Rs40-50. Secondly, two cinemas were still large, 300 seats each but the other two were 150 seats each and I didn't know how people would take to the small screens. But God is kind, when we opened the doors, there were queues outside. It was quite exciting to see the experiment had worked.
Do you think the death of the single screen took something away from the movie-viewing experience?
No. You have a lot of cinemas that offer a big-screen experience, our biggest auditoriums are 350-400 seaters. And now, compared to where people are watching films (hand-held devices), even the 200 seaters are big-screen experiences.
I never differentiate between single screens and multiplex cinemas, I just think all cinemas have to be of a certain quality because people in India take their movie-going experience very seriously. You should have good sound and projection system and air-conditioning and then it's a price-point adjustment that needs to be done because India is such a disparate market.
What have been the major changes in the film industry and exhibition market in 20 years?
Content is improving a lot. You have films that can be played in fewer cinemas, say Pink, or Tanu Weds Manu Returns and the Salman, Aamir and Shah Rukh Khan-starrers that release in 4,000 screens. Consumers have changed, as have their tastes. English movies always used to do well but now they do much better and penetrate into smaller towns by getting dubbed. The big change is now there is real estate available to build world-class multiplexes. Tax regulations are a very big disappointment for me-nowhere across the world do cinema tickets get as heavily taxed as in India. Now we're waiting for GST (goods and services tax); if it comes in at a palatable rate, it'll be a big change.
There was a lot of talk of PVR being acquired by the Chinese group Wanda.
I have no idea where that is coming from. I thought this Warburg Pincus deal would at least put those rumours to rest (In January this year, private equity firm Warburg Pincus bought a 14% stake in PVR for Rs820 crore).
How would you address the whole crisis of declining footfall and the advent of digital platforms in India?
Actually, footfalls have not been declining. Theatres still represent 60-65% of revenues and any content maker would want to completely monetize the movie on the big screen. To that extent, cinemas have exclusivity for at least two to three months, depending on how big the movie is. Secondly, I believe people love going out and watching movies, it's still a great social outing.
Plus the budget of some films runs into some $100-150 million. How do you recover if you go straight to digital? There is commitment from studios internationally and even in India to make movies that are larger-than-life and meant to be seen on the big screen. Then there are efforts by the technology providers, so many movies are being made in IMAX and 3D. So if you look at all these things, I think we should survive. Currently, 66% of the revenue comes from theatricals, 22-23% is food and beverage, 10-12% is advertising and marketing.
What are your most important lessons in these 20 years?
There are so many, you learn everyday. After diversifying into film production, I realized I'd rather do one thing but do a good job of it. I think integrity is very important, you're running a listed company, you should be transparent. Every unit that you build should be profitable. Out of the 130 cinemas that we have, only three are Ebitda-negative, most make money (Ebitda is short for earnings before interest, taxes, depreciation and amortization, an indicator of operating profitability). There was a lot of talk in between about screens but I was fortunate I had Renuka Ramnath (earlier with ICICI Ventures) who invested in my company in 2003. She wasn't looking at screens but at the returns on capital employed. The other lesson is you have to remain restless and keep improving. Twenty years have definitely taught me that all your stakeholders-employees, shareholders, investors, developers, film fraternity-are equally important and there's no harm in being nice and cordial with people.
Have you responded to the Securities and Exchange Board of India show-cause notice? (In November 2016, the markets regulator had asked PVR to explain a profit-sharing deal struck with private equity investors that was not disclosed to its shareholders, alleging that its promoters had violated listing and disclosure regulations)
I have and it's being handled by my lawyers. I've been advised not to say anything and they will give you the correct answer. But my conscience is extremely clear.
Where does film exhibition in India stand at the moment?
We're really under-screened and need more cinemas in main cities as well as tier-two and tier-three towns. But there are other issues too. If taxes and rentals don't get rationalized, it could be a problem of too many screens. In the US, they make money even at 15-20% occupancy. That's because the tax is zero and the rental is not more than 10% of your total revenue. Here the rental is going up but you can't blame the real estate developers because the supply is limited. I don't think GST should be more than 18%, the real estate cost has to be controllable, developers and cinema exhibitors should be given incentives by the government the way we were given when the tax exemption was announced to build multiplexes.
The volatility of content also has to get better, you can't have too many flops and just one Dangal helping you out, there has to be a little more effort on the script and execution and knowing what the consumer wants. When a massive filmmaker delivers a flop with a big cast, it worries you because you've allocated so many screens and shows.